Johnson & Johnson has gone through a spate of recent problems, but its size, earnings record, dividend record, productivity and R & D still make this healthcare solutions giant a “buy”.
As the world’s largest and most diverse provider of healthcare solutions, Johnson & Johnson (NYSE─JNJ) boasts an impressive lineup of products including prescription and over-the-counter pharmaceuticals, diagnostic and imagery equipment, and consumer healthcare products.
For that reason, Odlum Brown analyst Steven Zicherman firms up his “buy” recommendation and target share price of $117 by insisting that the company is to remain on the upswing following a period of production shortages, recalls, and loss of exclusive pharmaceutical patents suffered by the company in 2010-11.
Mr. Zicherman’s position is backed by J&J’s 31-year track record of adjusted earnings increases and 52 years of consecutive dividend increases, both of which are expected to continue as J&J sets the stage for greater growth.
One concern that the analyst points out is the potential for merely modest returns, despite the veritable gold mine that the company appears to be on paper. He points out that the healthcare industry as a whole, valued at $8.4 trillion in 2012, is expected to grow at 3 to 5 per cent per annum for the next decade.
However, beyond this, he maintains that Johnson & Johnson is uniquely diversified even among its top-tier competitors due to the breadth of healthcare solutions products it offers and its productivity with regards to research and development, which is often the make-or-break factor when competing in this industry.
Further emphasizing why investors should consider buying a position in J&J, the analyst points out that the stock is currently trading in line with its historical averages and below his firm’s estimate of the business’s intrinsic value.
In terms of risk, he reiterates that J&J benefits from its strong market position and recurring revenues and also boasts one of the strongest corporate balance sheets in the world. In addition, it holds a coveted triple-A credit rating by all three major rating agencies.
Investor’s Digest of Canada, MPL Communications Inc.
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